In October of 2025, Representative Fiona McFarland filed (sponsored) House Bill 145 which proposes to raise sovereign immunity caps in multiple phases from the current caps of $200,000 per individual/$300,000 per incident to as high as $600,000 per individual/$1.2 million per incident at the final phased increase in October 1, 2031. House Bill 145 also allows local governments to negotiate settlements with claimants in amounts that exceed the proposed statutory caps. If passed, the higher caps will undoubtedly increase the costs of private contractors doing business with governmental agencies under service contracts, project-specific contracts, professional services contracts, construction contracts, term contracts or independent contractor agreements, due to the private contractor’s required absorption of higher potential liabilities.
To be sure, more often than not governmental procurement contracts in Florida contain unilateral indemnification clauses in favor of the procuring public agency. In conjunction with typical insurance requirements in favor of the agency, mandatory contractual indemnification clauses generally require a private company to defend, indemnify and hold the agencies and their affiliates harmless for nearly all claims of third-parties. Although in most other contexts these incidental indemnification provisions would be strictly construed against the drafter and tend to minimize subcontractor exposure, courts in Florida routinely interpret indemnity provisions in government contracts far more broadly such that a duty to both defend and indemnify a governmental agency is often found to exist even in the face of ambiguous drafting language. This usually means that private contractors are required to assume the defense of governmental entities outside of any insurance requirements as the obligation to provide a defense co-exists with the obligation to indemnify the agency.
Immunity caps factor into the defense and indemnity analysis in that the contractor can rely on relatively limited exposure when it comes to contingent third-party liabilities of the agency. The typical fact pattern is this: a governmental agency is sued and then tenders its defense and indemnification to private companies whose contract work may be related to the third-party claim. Per the terms of the contract, the private contractor assumes the defense of the governmental agency but, since any exposure of that agency is currently limited to just $200,000 per claimant – often a fraction of the overall claim – the contractor can strategically defend the claim using the immunity limitations as a shield against overall exposure. If HB 145 is passed, however, the proposed statutory cap of up to $600,000 will eventually triple the contingent liability exposure for private companies and in most tort cases eliminate a strategic use of immunity limitations.
Another proposed change within HB 145 is a governmental agency’s choice to settle claims above the immunity caps. Here too a private contractor faces significantly increased costs and liability exposure. Take a scenario where a high value claim is presented to a governmental agency who then tenders that high value claim to a contractor the agency believes is required to defend, indemnity and hold the agency harmless. If the contractor is (objectively or subjectively) slow to respond, does not respond or denies the tender, under HB 145 the agency can choose to settle the claim for whatever value it chooses and thereafter recover from the contractor whatever that value is. No longer is the immunity cap, whatever it is, a benchmark for reasonableness in settling claims, and no longer do claimants need to look further than the governmental agency for a higher-paying defendant. For as long as the governmental agency is managing the claim while a tender to its private contractor remains open, the private contractor has exposure to unlimited indemnification in favor of the agency.
For private companies who benefit from government contracts, there are ways to mitigate potential increased financial risk in the event House Bill 145 is passed by the Florida Legislature, although each option does require advance negotiation with the procuring agency. Negotiating a limitation of liability provision that modifies the indemnification requirements, either directly in the procurement or by addendum, is one option to mitigate potential increased financial risk from an increased statutory cap on tort damages. Another example is to negotiate a carve-out from indemnification for the sole negligence of the governmental entity. There is also the option to limit the applicability of indemnification to scenarios arising from a private company’s breach of its contract with the governmental entity. A final example is to negotiate conditions that require the governmental entity provide prompt notice of a third-party claim and to enable a private company to participate in the pre-suit settlement process.
The take-away from proposed House Bill 145 is that contingent liability exposure for the defense and indemnification of government agencies will inevitably increase and, at the same time, potentially limit some strategic advantages current immunity caps provide. While HB 145 is still pending, and certainly if it passes and becomes law in Florida, companies that regularly contract with governmental agencies should review their current contracts with the government to determine their current exposure levels and confirm whether they have coverage to meet this increasing exposure to contingent agency liabilities.